The Financial Conduct Authority has launched a review of the claims management market, following concerns consumers are being failed.
The review, which will be conducted in collaboration with the Solicitors Regulation Authority and other regulatory partners, will look at the root causes of poor practices across the market, such as aggressive marketing, misleading advertising and unfair exit fees.
Other concerns include consumers being signed up without their consent or by multiple representatives, potentially causing confusion and delaying compensation.
The city watchdog said it plans to use its review and supervisory powers to examine whether consumers receive fair value and whether existing price caps are still fit for purpose; whether financial incentives, including fee structures, funding and insurance arrangements, create conflicts of interest and if the full end-to-end consumer journey from lead generation to marketing and advertising delivers good consumer outcomes.
The FCA will also look at whether different approaches across different regulatory regimes affects firm behaviour and if some firms are failing to secure the appropriate permissions.
It said that where it believes legislative change is needed, it will make recommendations to government or relevant bodies.
Alison Walters, director of consumer finance at the FCA, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy.
“This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.”
Aileen Armstrong, SRA executive director, strategy, innovation and external affairs, commented: “When they work well, claims management services can benefit consumers. But we are concerned about poor practices and behaviours that are not looking after consumers’ best interest.
“We will work closely with the FCA on this important review. This is a cross-sectoral problem that requires joined-up solutions.”
Further information on the review is expected by mid-May.
